December 2008

December 19, 2008

The actual headline reads: White House to Loan Auto Industry $17.4B. I believe mine is more accurate.

Yes,
it would be devastating if GM and/or Chrysler failed. But this loan is
not the only option. Yesterday it was reported President Bush was
considering managed bankruptcy for the automakers, as a last resort"to be used only if an agreement for a voluntary overhaul of the
industry could not be reached". The UAW and auto executives fought
bankruptcy because they do not want to overhaul the
industry. Union leaders especially do not want to make the drastic
concessions necessary for the automakers to survive:

In a traditional bankruptcy proceeding, the U.A.W.’s contracts could
be voided and the union forced to renegotiate benefits like health care.

GM, for instance, has about 450,000 retirees - more than three times
the number of its current full-time employees - to whom it pays
pensions and for whom it provides medical care. By some estimates,
medical costs alone add $1,500 to the average cost of each GM
automobile. And the company is facing an unfunded liability of more
than $80 billion, about half its annual pre-downturn gross sales, for
future health-care costs for employees and retirees and their
dependents.

Which explains the old joke that GM is no longer a car company that
provides health benefits, but a health-care company that happens to
make cars.
Unfortunately, the joke's on us. It is now the responsibility of the
taxpayers to insure the continued funding of bottom-line busting health
care benefits.

UAW President Ron Gettelfinger has consistently
maintained bankruptcy is not an option. Yes, it is. No it's not
something most companies want to do but when faced with overwhelming
costs and a need for drastic restructuring, bankruptcy is the most
viable option. Bankruptcy courts exist for this very reason. As for
the (supposed) main objection to bankruptcy, that no one would buy a
car from an automaker in Chapter 11, surveys don't back it up:

A pair of new surveys suggest buyers aren't completely unwilling to
buy a car from an auto maker in bankruptcy court, as long as the
federal government is willing to play a role in helping the company
restructure.

This contradicts the conventional view of Detroit auto makers that
suggests consumers would shun a bankrupt auto maker over fears related
to the resale value of a car, the warranty and the ability to secure
service and replacement parts.

Too
bad the survey didn't ask another question: Would you be more willing
to buy from a company in bankruptcy or one in "bailout"?

It will be interesting to see exactly what concessions the UAW is making in exchange for $17.4 billion.

There are many ways to honor the dead. In the case of Paul Weyrich, I
respectfully suggest that we forget about the flowers, as important as
they may be. Rather, the most appropriate way to pay tribute to this
remarkable man is for us to speak the profound, eternal truths in the
public policy arena, especially when doing so may cause some personal
or professional discomfort. It would only deepen and extend his most
enduring legacy.

Rashad Johnson was named to the second team and Roland McClain to the third. Rolltide.com:

Johnson, a former walk-on and second-team All-America selection, has
developed into one of the finest safeties in college football after
accounting for 82 tackles, five tackles for loss (-15), one sack (-7),
five interceptions – two of which were returned for touchdowns – and 11
pass break-ups. His 16 passes defended lead the SEC and is tied for
21st nationally. Johnson was selected as a first-team All-American by
the American Football Coaches Association and was a second-team Walter
Camp All-American.

McClain, a sophomore middle linebacker, garnered third-team
accolades after leading Alabama with 91 tackles and 11.0 tackles for
loss (-44). He ranked second on the team with 3.0 sacks (-22) while
intercepting one pass, recording five pass breakups and recovering two
fumbles.

Alabama freshmen Julio Jones and Dont’a Hightower were named to the Sporting News’ 2008 All-Freshman Team on Tuesday.

Jones, a wide receiver from Foley, Ala., was selected to the first
team while Hightower, a linebacker from Lewisburg, Tenn., was named to
the second team.

Jones set Alabama freshman records for receptions (51), receiving
yards (847) and touchdowns (4). He led the Crimson Tide in all three
categories while ranking fourth in the SEC in receiving yards per game
(65.2) and seventh in receptions per game at 3.92.

Hightower ranks fourth on the team with 62 tackles headed into the
Allstate Sugar Bowl against Utah. He started 12 games and has 2.5
tackles for loss (-6) and five quarterback hurries. Hightower also
recovered two fumbles and forced one fumble.

Rolltide.com has a complete list of 2008 Crimson Tide All-Americans. More to come.

The Bush administration was considering using money from the
$700-billion Troubled Asset Relief Program, designed to help the
financial services sector, to provide the emergency loans to
automakers. House Speaker Nancy Pelosi (D-San Francisco) told reporters
Monday that she was optimistic action would come "sooner rather than
later."

"All the signals coming from the White House are that they know that
bankruptcy is not an option, and that TARP funds are the only recourse"
after a $14-billion auto bailout bill failed in the Senate last week,
Pelosi said.

Todd Zywicki debunks this mantra and offers a reasonable explanation why some in Congress are refusing to consider bankruptcy as a solution to the (self-inflicted) mess the automakers are in. Bankruptcy Is the Perfect Remedy for Detroit:

While Washington tries to arrange a bailout, the Detroit Three auto
makers and their union, the United Auto Workers, keep insisting that
bankruptcy would be the kiss of death. Not so: a Chapter 11 bankruptcy
filing will likely result in a stronger domestic industry.

To understand why, consider that the fundamental question to ask of
any firm facing bankruptcy is whether it is "economically failed" or
simply "financially failed."

...

General Motors looks like a financially failed rather than an
economically failed enterprise -- in need of reorganization not
liquidation. It needs to shed labor contracts, retirement contracts,
and modernize its distribution systems by closing many dealerships.
This will give rise to many current and future liabilities that may be
worked out in bankruptcy. It may need new management as well.
Bankruptcy provides an opportunity to do all that. Consumers have
little to fear. Reorganization will pare the weakest dealers while
strengthening those who remain.

So why do the Detroit Three managements and the UAW insist that
"bankruptcy is not an option"? Perhaps because of the pain that would
be inflicted upon both.

The UAW doesn't want to take the strong medicine that would be required under bankruptcy. Its leaders know that Congress is not inclined to force major concessions on the union or to scrutinize it too closely. Management has more to fear from Congressional oversight but it would still be considerably more pleasant than facing a bankruptcy judge:

Those Washington politicians who repeat the mantra that "bankruptcy
is not an option" probably do so because they want to use free taxpayer
money to bribe Detroit into manufacturing the green cars favored by
Nancy Pelosi and Harry Reid, rather than those cars American consumers
want to buy. A Chapter 11 filing would remove these politicians'
leverage, thus explaining their desperation to avoid a bankruptcy.

In short, Detroit and the public has little to fear from a
bankruptcy filing, but much to fear from the corrupt bargain that is
emerging among incumbent management, the UAW and Capitol Hill to spend
our money to avoid their reality check.

Management might be in for a few surprises, however. Congressional Democrats are notorious for mandating burdensome regulations on employers. As Zywicki points out, by handing over "free taxpayer money" they will dramatically increase their leverage. To the detriment of us all.

This bailout will give more power to self-interested politicians in Washington. The hammer will be aimed at management, UAW will operate pretty much as ususal, and the Big Three will continue losing market-share to those dastardly foreign automakers in the South.

And this is just the beginning. In the not so distant future we'll be hearing how we must give the Big Three another loan, and another. "Taxpayers have too much money invested to let the automakers fail" will be the story line. A nationalized automobile industry will be the result. It's starting now.

December 15, 2008

A federal grand jury is investigating whether a financial firm
improperly won more than $1.4 million in work for the state of New
Mexico shortly after making contributions to political action
committees of Gov. Bill Richardson (D).

The
probe focuses on whether the governor's office urged a state agency to
hire CDR Financial Products. The probe is in a highly active stage at a
time when President-elect Barack Obama has chosen Richardson as his nominee for secretary of commerce, according to two sources familiar with the investigation.

...

The inquiry is part of a long-running nationwide investigation into
"pay-to-play" practices in local government bond markets. In other
cities, federal investigators are questioning whether financial firms
have lavished politicians with money and gifts in exchange for
fee-paying work advising municipal and local governments on
investments. Authorities indicted the mayor of Birmingham, Ala., this
month on charges of taking hundreds of thousands of dollars in gifts
and loans from a firm that led the city into toxic investments and
massive bankruptcy.

Why did U.S. Attorney Patrick Fitzgerald decide to arrest Illinois Governor Rod Blagojevich on Tuesday, December 9? Because of a story the Chicago Tribune published on Friday, December 5. Cam Simpson, reporting for The Wall Street Journal:

At Fitzgerald’s request, the paper had been holding back a story since
October detailing how a confidante of Blagojevich was cooperating with
his office.

...

But editors decided to publish the story on Friday, Dec. 5, ending the Tribune’s own cooperation deal with the prosecutor.

Which brings up another "why"? Why did the editors decide to end their cooperation with Fitzgerald? Thanks to the paper's tipoff, Blagojevich was able to "undo" a meeting he had his brother, “Fundraiser A", set up with an alleged supporter of Jesse Jackson, Jr., "Senate Candidate 5". December 4:

...Blagojevich allegedly told his brother, a man identified in the
affidavit as “Fundraiser A,” that he was “elevating” Mr. Jackson on the
list of candidates, because the governor might be able to get something
“tangible up front” for the pick.

He told his brother to meet with someone (unidentified by the feds)
whom the pair believed to be close to Jackson. He urged his brother to
tell this alleged supporter of Jackson that “some of this stuffs gotta
start happening now… right now…and we gotta see it. You understand?” He
was talking about campaign cash, the feds allege.

Then he allegedly offered his brother one final proviso: “I would do it in person. I would not do it on the phone.”

The next morning, on Friday, Dec. 5, it all came crashing down for the FBI agents underneath the headphones.

Here is how Fitzgerald addressed the Tribune article at the press conference following Blagojevich's arrest:

QUESTION: Mr. Fitzgerald, would you make clear just something about the
timing here? When the Tribune ran its story a few days ago revealing
that the governor was being taped, would you explain -- and I think
some of this is laid out in the complaint -- did further taping take
place or did that essentially terminate your ability to listen in?

MR. FITZGERALD: Well, what I would say is, to back up and to
the extent that there have been articles, I'm not confirming or denying
the accuracy of the articles. You can compare them against what
happened.

I will say this, as you guys know, you guys are in the
information business of getting it and publishing it, and we're in the
information business of getting it and using it.

About eight weeks ago, before we had the bug installed and
before we had the wiretap up, we were contacted by the Tribune to
comment or confirm or deny on a story that they were going to run.

Had they ran that story, we thought we'd never have the
opportunity to install the bug or place the telephone tap. And we made
an urgent request for the Tribune not to publish that story.

That is a very rare thing for us to do and it's an even rarer
thing for a newspaper to grant. We thought that the public interest
required that the story not run.

It was a difficult conversation to have because we weren't
allowed to describe what we doing, and I have to take my hat off that
the Tribune withheld that story for a substantial period of time, which
otherwise might have compromised the investigation for ever happening.
And I think that's something that we should take note of.

And later, at a later point in time that story did run. I
believe it ran on Friday morning. And we were recording after the story
ran that said feds tape of Blagojevich, and as set forth in the
complaint, days before, or even the day before that story ran, Governor
Blagojevich was intercepted telling his fund-raiser to have that
conversation about wanting to see campaign contributions up front and
telling him to talk as if the whole world is listening; be careful, do
it in person, not over the telephone.

And then, after the story ran, we got a different conversation the next day, which basically says, undo what you just did.

So it was clear that the reaction to the story was to think that they
shouldn't proceed down that road. So to the extent that we had a number
of weeks of interception (inaudible) the telephone, I do -- I do think
we -- we ought to credit the Chicago Tribune that they agreed to that
request.

They didn't agree to all our requests. As you might imagine, they saw
it differently than we did. But I appreciate that and respect what they
did.

That's curious. He takes his "hat off" that the Tribune held off so long? The story broke just before Blagojevich was about to (attempt) to make the deal with "Senate Candidate 5", Jesse Jackson, Jr. I believe Fitzgerald would have a better case if the governor had been caught in an illegal act rather than conspiring to commit one.

The Tribune does have an interest in this case, other than just breaking the story:

In addition to the pay-to-play allegations, which are described in
greater detail in the complaint, we also were surprised to learn of an
extortionate attempt against the Chicago Tribune newspaper.

The Chicago Tribune had not been kind to Governor Blagojevich,
had written editorials that called for his impeachment. And Governor
Blagojevich and defendant Jonathan -- John Harris, his chief of staff,
schemed to send a message to the Chicago Tribune that if the Tribune
Company wanted to sell its ballfield, Wrigley Field, in order to
complete a business venture, the price of doing so was to fire certain
editors, including one editor by name.

In the governor words -- governor's words, quote, "Fire all
those bleeping people. Get them the bleep out of there. And get us some
editorial support," close quote. And the bleeps are not really bleeps.

The defendant Harris tried to frame the message more subtly to
get the point across to the Tribune that firing the editorial board
members would be a good thing in terms of getting financing to allow
the sale to go forward.

Maybe the editors were just interested in payback and not interested in seeing Jesse Jackson, Jr., among other prominent political figures, possibly leading to Barack Obama, implicated. The timing is suspicious, to say the least.

December 14, 2008

And on and on it goes. I guess some folks haven't noticed that senators from Colorado, Wyoming, Montana, Utah, Minnesota, Idaho, Nevada, Iowa, New Hampshire, Arizona, Alaska, Kansas and South Dakota voted against the bailout. Oklahoma and Texas too but sometimes they get lumped in with us.

"What this is is the Southern conservative senators trying to destroy
the United Auto Workers, trying to destroy unions," said Mike O'Rourke,
president of a UAW local at a GM factory in Spring Hill, Tenn.,
(Senator Bob) Corker's home state. "It's a sad day in America when the senators turn
their back on Main Street."

Southern senators are being singled out because many foreign automakers have plants in the south. (There are three foreign plants here in Alabama: Honda, Mercedes-Benz and Hyundai). So the senators must have had an ulterior motive for opposing the bailout, right? Protect the foreign companies at the expense of Mom, Apple Pie, and Chevrolet. The problem with that theory is that the failure of the Big Three would harm the entire automotive industry, foreign and domestic. And there's some irony at work here, too. If the UAW were to agree to some of the concessions proposed by Senator Corker, the Big Three would become more competitive and sell more cars, thus cutting into the market share of the foreign companies. At any rate it is outrageous that union leaders and members of Congress, among many others, are accusing these senators of intentionally trying to kill the Big Three and millions of jobs with it. That's a pretty harsh accusation with nothing to back it up. Their motives are being questioned simply because of where they live. Those senators from other parts of the country who also voted no don't seem to be taking quite the heat that southerners are. Why is that?

(Speaking of ulterior motives. Has anyone questioned the motives of the Democrats who voted for the bailout? Since 1990, the United Auto Workers union has contributed almost $25 million to Democrats. During the same period the union gave $180,200 to Republicans. Quite a gap. Of the 35 Nay votes on the cloture motion only 4 were Democrats. One of those was Senate Majority Leader Harry Reid who voted no in a procedural move. Here is a link to the roll call).

Turning this into a North vs. South issue serves no good purpose. Besides, polls consistently showed a majority of Americans opposed the bailout. This southerner opposed the bailout and never gave one thought to the automakers here in Alabama. Regardless, there are GM, Chrysler and Ford dealers across the state. Many Alabamians work at these dealerships and for companies that supply them. Many more Alabamians drive the cars they sell. If any one of the automakers fails it would affect jobs here.

But I think there's something else at work here. The UAW has long tried to unionize the automobile plants in the South. And has failed miserably:

The southern auto belt from South Carolina to Texas, home to eight
German, Japanese, or Korean plants (plus three more under
construction), is right-to-work country. In these states, workers can't
be compelled to join a union or pay dues, and not many are inclined to
sign a union card anyway. The result: The UAW has failed miserably to
organize workers. No Mercedes, VW, Honda, Toyota, Hyundai (KIA's
parent), BMW, or Nissan plant in the South is unionized.

Unionizing these plants is a top priority for UAW. Come January the union is going to get a little help from its Democratic friends in Washington. The Employee Free Choice Act, commonly referred to as "Card Check" would abolish the secret ballot now used when employees vote on unionization:

The act would effectively strip workers of the protection of secret
ballots in union certification elections. Replacing the privacy of the
voting booth, workers would be asked to publicly sign cards indicating
support for a union, exposing them to harassment and intimidation.
Unions could badger workers repeatedly, at work and at home, to sign a
card acquiescing to representation and, in most cases, employers would
have limited ability to give workers their side of the story.

Thus making it easier, and cheaper, to drag these plants down to Detroit's level and, of course, increase union dues. Barack Obama and congressional Democrats support this legislation (see contribution figures above) and when the new Congress takes over in January it will be a priority (see contribution figures above). The legislation will certainly be opposed by most Republicans, including the ones who voted against the bailout. It serves UAW's purpose to paint the senators as anti-union, anti-little guy, anti-America, possibly gaining sympathy from the voters and intimidating fence-sitters in Congress - although workers in the South might not be intimidated. Kathy Ward works for Nissan in Smyrna, Tennessee:

"Some were wholehearted for the union, I was wholehearted against," she recalled of the last union vote in 2001.

"I don't need anyone to speak my mind for me. And I certainly don't want to pay someone to do it for me."

One could take a look at what's happening today with the Big Three automakers and come to the conclusion Kathy Ward has a point. Bottom line though, UAW wants this legislation passed and has paid big money to get it done. Demonizing those who might stand in the way could serve a greater purpose down the road. And framing the debate as North vs. South could be nothing more than a calculated scheme to further serve that purpose. That would be an ulterior motive.

December 13, 2008

Once again the septic tank that is Chicago politics has stopped up and the sewage is overflowing. And once again Barack Obama is saddened - and blissfully unaware of Illinois Governor Rod Blagojevich's "maneuvering". Barack Obama is going to be the leader of the free world, in fact he's going to change the world! If his time in Illinois is any indication, the world is in a heap of trouble. Apparently he went from a Chicago community organizer, to the Illinois State Senate, to the United States Senate with one eye closed and a banana in his ear. Or maybe he just didn't want to know.

“I’m saddened by today’s verdict,” Obama said Wednesday. “This isn’t the Tony Rezko I knew,
but now he has been convicted by a jury on multiple charges that once
again shine a spotlight on the need for reform. I encourage the General
Assembly to take whatever steps are necessary to prevent these kinds of
abuses in the future.”

Obama's response to comments made by his (former) preacher, Jeremiah Wright:

"I am outraged by the comments that were made, and saddened over
the spectacle that we saw yesterday," Obama said.

"The person I saw yesterday was not the person that I met 20 years ago.
His comments were not only divisive and destructive, but I believe they
ended up giving comfort to those who prey on hate," he said.

“As I have traveled this country, I've been impressed not by what
divides us, but by all that that unites us. That is why I am deeply
disappointed in Father Pfleger's divisive, backward-looking rhetoric,
which doesn't reflect the country I see or the desire of people across
America to come together in common cause," Obama said in a statement.

STEPHANOPOULOS: A gentleman
named William Ayers, he was part of the Weather Underground in the 1970s. They
bombed the Pentagon, the Capitol and other buildings. He's never apologized for
that.

And, in fact, on 9/11 he was quoted in The New York
Times saying, "I don't regret setting bombs; I feel we didn't do
enough." An early organizing meeting for your State Senate campaign was
held at his house and your campaign has said you are "friendly."

Can you explain that relationship for the voters and
explain to Democrats why it won't be a problem?

OBAMA: George, but
this is an example of what I'm talking about. This is a guy who lives in my
neighborhood, who's a professor of English in Chicago who I know and who I have not
received some official endorsement from. He's not somebody who I exchange ideas
from on a regular basis.

And the notion that somehow as a consequence of me
knowing somebody who engaged in detestable acts 40 years ago, when I was 8
years old, somehow reflects on me and my values doesn't make much sense,
George.

"Like the rest of the people of Illinois I am saddened and sobered by
the news that came out of the U.S. attorney's office today. But as this
is an ongoing investigation involving the governor, I don't think it
would be appropriate for me to comment on the issue at this time,"
Obama said — and then he said he wasn't aware of Blagojevich's
maneuvering.

Obama's circle of major Illinois political allies and supporters is
largely separate from Blagojevich's, with two major exceptions. Both
Obama and Blagojevich got extensive money and support from Chicago
businessman Antoin "Tony" Rezko, who is now under federal indictment. And Obama is close to Illinois Senate President Emil Jones, who has been the governor's staunchest legislative ally.

Maybe Obama didn't hang with Blagojevich but he does have a "long-term" association with him:

Obama Advised Blagojevich On His Victorious Gubernatorial Run. “That
year, [Obama] gained his first high-level experience in a statewide
campaign when he advised the victorious gubernatorial candidate Rod
Blagojevich, another politician with a funny name and a message of
reform.” (Ryan Lizza, “Making It,” The New Yorker, 7/21/08)

*
Obama: “If the governor asks me to work on his behalf, I’ll be happy to
do it.” (John Patterson, “Senator Says He’s Still Willing To Help
Blagojevich Despite Hiring Concerns,” Chicago Daily Herald, 7/27/06)

Obama
Endorsed Blagojevich For A Second Term. “Obama, who endorsed
Blagojevich for a second term nearly 18 months ago, said he’s ready to
help Illinois democrats in the upcoming elections.” (John Patterson,
“Senator Says He’s Still Willing To Help Blagojevich Despite Hiring
Concerns,” Chicago Daily Herald, 7/27/06)

* Obama: “We’ve got a
governor in Rod Blagojevich who has delivered consistently on behalf of
the people of Illinois.” (Deanna Bellandi, “Illinois Democrats Talk
Unity But Don’t Show It,” The Associated Press, 8/16/06)

And that pesky Tony Rezko just keeps popping up. Rezko had "strong ties" with Blagojevich just as he had strong ties with Barack Obama.

Long before Barack Obama launched his campaign for the White House, when he
was considering a run for the US Senate in 2003, he paid an intriguing visit
to a former Chicago sewers inspector who had risen to become one of the most
influential African-American politicians in Illinois.

“You have the power to elect a US senator,” Obama told Emil Jones, Democratic
leader of the Illinois state senate. Jones looked at the ambitious young man
smiling before him and asked, teasingly: “Do you know anybody I could make a
US senator?”

According to Jones, Obama replied: “Me.” It was his first, audacious step in a
spectacular rise from the murky political backwaters of Springfield, the
Illinois capital.

The exchange also sealed an intimate personal and political relationship that
is likely to attract intense scrutiny amid the furore over Obama’s links to
some of Chicago’s most controversial political and religious power brokers.

Obama has often described Jones as a key political mentor whose patronage was
crucial to his early success in a state long dominated by near-feudal party
political machines. Jones, 71, describes himself as Obama’s “godfather” and
once said: “He feels like a son to me.”

...

For almost a year Jones has used his position as leader of the state senate to
block anticorruption legislation passed unanimously by the state’s lower
house. He has also become embroiled in ethical controversies concerning his
wife’s job and his stepson’s business.

...

At one point during Obama’s 2003 Senate campaign, Jones set out to woo two
African-American politicians miffed by Obama’s presumption and ambition. One
of them, Rickey “Hollywood” Hendon, a state senator, had scoffed that Obama
was so ambitious he would run for “king of the world” if the position were
vacant.

When Jones secured the two men’s support, Obama asked his mentor how he had
pulled it off. “I made them an offer,” Jones said in mock-mafioso style.
“And you don’t want to know.”

Jones is now at the centre of a long row over his attempt to block proposed
laws cracking down on his state’s “pay-to-play” tradition – whereby
companies hoping to win government contracts have to contribute to the
campaign funds of officials.

Jones’s staff say he blocked the bill because he intends to produce something tougher.
No proposals have appeared.

Twitter Updates

The Federalist Papers

Degree of Madness

"...... ambitious encroachments of the federal government, on the authority
of the State governments, would not excite the opposition of a single State,
or of a few States only. They would be signals of general alarm.....But what
DEGREE OF MADNESS could ever drive the federal government to such an
extremity."
Federalist #46 James Madison